The Men Behind i-Flex

This is the story of an idea. And a passion. And of the two brought together
to form a great business model. It’s also the story of foolhardiness, a
certain madness if you will. For madness it was, to decide in 1992 to set up a
company whose mainstay would be a "Made in India" shrink wrapped
software product. It’s a story of that madness which is now a Rs 610 crore
company that grew 43% last fiscal despite the downturn.

The
Citibank lineage helped, of course (see Timeline). But the story of i-flex is
the story of a few people who dared to stake their careers on a belief. Says
Rajesh Hukku, chairman and managing director and the man who started it all,
"With all the great things that Indian software engineers were doing, the
problem was that the end users still said, ‘you are great programmers but you
don’t understand my business’. That’s when I though that unless we reach
that kind of understanding, unless we can sit across the table and are able to
talk to the customer about his business, we will always be cheap labor." So
he began thinking about products, enticed among other things by the fact that
the product business model is very non-linear.

Hukku then approached a few people within Citicorp Overseas Software Limited
(COSL), among them R Ravishankar (see The Men Behind...). A core group that
bought into the idea first sold it to Citibank itself and later made a
presentation to each and every employee at COSL. The choice given to them —
keep your secure job with a prestigious MNC development center with an assured
and stable business model. Or move to an upstart that intended to try and make a
living selling an Indian product to banks across the world. An upstart that knew
nothing about either the product or the company.

"In a sense, that worked out very well," says Ravishankar, "we
got all the risk takers." About 20 of them. And Citicorp Information
Technology Ltd (CITL) was born.

The
beginning of a journey

That, however, was only the first of one of the many major turning points
that the company was to face. The first three decisions they got out of the way
quickly. These were (a) that they would specialize in the financial services
vertical, (b) that they would create their own IP and move directly into the
high end via products, and, (c) that they would be global in nature.

Question was — whom would they sell to? Who would buy?

Says Ravishankar, "We figured that if our first approach is to Chase
Manhattan at Park Avenue, chances are the security guard won’t let us
in." So they decided to go to emerging markets that were under the radar of
big international players of the time. So Malaysia, Kenya, Africa, Indonesia and
the Middle East became the first markets for CITL.

Having done the risk taking, it was also time for a little risk management.
So the services business was started to keep the money coming in for salaries
while they tried to hawk their products. "We were a small group of people
and we were very hungry. We knew nothing about running a company and we had
almost nothing to run on." So much so that in the early days they took
turns every day to come to office early to clean up and get the systems serviced
and going.

Land’s End? Not really…

The next big question came within two years — what after MicroBanker? They
had tried to sell in Europe and failed and knew the product needed a revamp. So
FLEXCUBE was conceptualized. The key dilemma, however, was — with what
technology? Says Deepak Ghaisas, CFO and CEO, India operations, "When
FLEXCUBE was being developed, object oriented programming was hitting big time.
Besides that, all the techies told us to go with a database called SmallTalk. We
chose instead to go with Oracle — it was a commercial decision. We didn’t
want to build a Taj Mahal. The argument was, we shouldn’t have to convince the
CIO on the fundamental technology itself." That debate lasted two days and
two nights, says Ghaisas, after which the company decided to go with Oracle and
Unix, Win NT and Win 2k as the server platform and all available flavors of
Windows on the client platform. "Some people left at the time because they
thought we were making a mistake," says Ghaisas.

It was an intense period. Two full years were being dumped into R&D for a
product that was being written from scratch and, therefore, had no assured
"upgrade clients" while the company tried to keep the wheels turning
through services and MicroBanker sales.

That effort, however, paid off and as CITL reinvented itself as i-flex
solutions. In 2000, it began to get more and more traction. Written in Oracle
Developer 2000, C, Visual Basic and Java, FLEXCUBE is a highly parametrized
offering and according to Joesph John, who heads the product factory, a new
version to be ported on Linux is in the offing. It now has more than a 100
customers in 84 countries, brings in a large chunk of the Rs 60 crore revenues
and last year had the largest number of new clients of all universal banking
solution products sold by any company worldwide.

In today’s turbulent times, that single-minded product approach seems like
the best thing a company could have done.

Services companies are facing a serious margin crunch and struggling with a
business model where the only way to increase revenue is to increase the body
count. A model in which while salaries only go up, the margins only seem to go
down. i-flex, though, still has its hurdles to cross. The one big one — to
grow upward and outward from the financial services vertical to other
specialized offerings to other specific verticals. With Reveleus, they believe
they have set the process into motion. They also believe that the FLEXCUBE
formula will be easy to replicate. Here’s wishing them luck.

SARITA RANI

Timeline...

1985: Citibank sets
up its own software development house in India called Citicorp Overseas
Development Center (COSL) to help in the international roll-out and support of
its solution called Cosmos that was written in Basic and ran on an IBM
mainframe. It became the first non-tech MNC to set up a development center in
the country.

1990: COSL
develops its own banking product — a wholesale banking solution called
Microbanker. Essentially, modules built on a reengineered version of Cosmos that
ran on Unix and Novell Netware using a middleware layer called BBx (Business
Basic Extended). Subsequently, a new LAN version was released.

1991: A
retail back office system called FinWare is launched.

1992: A
small group breaks away to address non-Citibank customers. Citibank part-funds
this company–Citicorp Information Technology (CITL).

1993: CITL
moves to a bigger setup in SEEPZ, already servicing 12 financial institutions.
In a landmark deal, HDFC bank signs up for FinWare.

1994: Within
a year, the HDFC project goes live and triggers the trend of banks offering
increasingly sophisticated retail services to its customers. CITL, in the
meantime, has grown to 500 people.

1995: Within
three years, the company realizes Microbanker will need a major makeover.
Technologies and platforms have changed and banks require ever more complex
operations computerized. Result–Flexcube is conceptualized. MicroBanker though
is still doing well and CITL holds the first-ever international user meet for
MicroBanker customers.

1996: IBS
ranks MicroBanker as the #1 selling global banking solution in 1995 in its
league. CITL starts a center of excellence on business intelligence for
consulting and software products, as well as warehousing and BI services. The
center will later lead to the setting up of Reveleus.

1997: Within
two years, the company launches its universal banking solution Flexcube. HDFC
Bank signs up as Flexcube’s first customer.

1999: Within
a year of launch, IBS ranks Flexcube among the top 10 international banking
solutions in the world for Calendar Year 1998.

2000: CITL
is re-named and re-branded as i-Flex Solutions. Flexcube, meanwhile, gets its
landmark 50th customer and becomes the #2 selling wholesale banking solution in
the world. The product finds traction. Flexcube Virtual Bank is unveiled at
SIBOS 2000 and Japan’s Shiensei Bank–a key catch–signs up for a
multi-million dollar deal on Flexcube. i-Flex also sets up its first subsidiary
outside the country in the Netherlands.

2001: In its
own specialized circle, the company begins to make waves. Flexcube is now among
the top three retail and wholesale banking solutions worldwide. Key wins include
a DBS bank implementation across 10 countries. The company expands and sets up
local development centers in Chennai and Pune. Its international foray begins
with the setting up of the Asia-Pacific HO in Singapore and another subsidiary
in the US. Deepak Ghaisas, CEO, India operations and CFO, wins the CFO Asia Best
Practices Award in the ‘Managing Finances in an SME’ category. The award is
instituted by the CFO Publishing Corp and The Economist Publishing Group.

2002: At
what was probably among the worst possible times, the company goes public with
shares listed on the Bombay and National Stock Exchanges in June 2002. Flexcube,
meanwhile, gets its 100th customer and remains on top of the IBS chart for the
third consecutive year. Big win–the International Monetary Fund. Meanwhile,
the company launches the i-Flex User Meet in March 2002 at Singapore draws
customers and indsutry experts from around the world. The Singapore presence is
expanded with the setting up of its first ODC there.

2003: It’s
a flurry. The company is listed in the Deloitte Touche Tohmatsu Asia-Pacific Fast
500. Asiamoney names i-Flex as the "Best Newly-listed Indian
Company". In the aftermath of regulatory changes, the company opens its
first development, support and demonstration center in the US. The best news so
far: IBS says Flexcube is the world’s largest selling universal banking
solution in 2002. The worst: i-Flex Netherlands CEO V Senthil Kumar is arrested
in London on an extradition request. He is subsequently released, but the
Netherlands operations will remain under a cloud till the matter is settled.

The Men Behind...

Rajesh
Hukku, chairman and MD

He started as a trainee programmer at TCS in
1979 and spent the next eight years being shipped from Australia to New Zealand,
Singapore, Malaysia and Europe. Though he joined COSL as a senior technical
consultant in 1987, the job profile quickly changed to S&M when he moved
over as head of the company’s US operations. The story of i-flex is in many
ways the story of Hukku’s ability to light a fire and keep it burning. All the
people he approached when he first decided to break away from COSL, he says,
were "gutsy people. Tremendous risk takers. I gave them the passion and
they gave me tremendous passion back". He also defined for himself, what he
now calls, three Missions Impossible. MI1 - to create a world class
"Made in India" product. MI2 — to make that product globally
successful. MI3 — to make that product the number one brand in its own niche.
It’s time now that Hukku defined MI4.

Deepak
Ghaisas, CFO and CEO, India operations

He started off with the Tatas at a time when a
Tata job was like getting a secure job for life. Instead, Ghaisas packed his
bags and decided to join the upstart CITL in 1993 driven by an interest in
technology, a new idea and a desire for change. He has since led the company
through amazing financial challenges — among them the decision to drown three
years of R&D into making FLEXCUBE without a single penny coming in. After
eight years of being a zero debt company, he also steered i-flex’s listing at
the BSE and NSE at a time most would have called suicidal. His next challenge,
"The main graveyard of companies is when they are between $100 million to
$500 million (in revenues)," Ghaisas says. "Unrealistic marketing
expenses, hiring global people at exorbitant salaries, one wrong acquisition —
and you are dead." His job - to steer the company clear of such pitfalls.

N R K Raman, senior vice-president, international
sales

Raman was doing research in nuclear physics and
teaching bachelor’s students when he decided to chuck it all and join
Datamatics in 1981, moving later to COSL and then CITL. Raman ran the early
product development factory but took a big break from technology with his new
sales job. "I can roll up my sleeves and debug a code even today if it
comes to that," he says.

V Shankar, head, IT services division

In the long run, i-flex will have to look at other verticals. Reveleus is
the product that is likely to get them there. Ramakrishnan passionately believes
in safeguarding the individuality of the product and the unit. "This
is," he says, "our vehicle for branching out." You will hear more
from this man.

Makarand Padalkar (Mak), chief of staff, EMO

He ran the gauntlet from programmer to
marketing before joining i-flex six years ago. He now leads product marketing in
the company. "It’s a different game," he says. "When you’re
selling a product, the customer expects you to be complete. That’s the
fundamental difference between services and products. In products, either you’re
complete or you’re not there."

R Ravishankar, CEO, international operations and
technology

Hukku and Ravishankar joined COSL more or less at the same time and went their
separate ways till Hukku decided on breaking away. Luckily, both were in the US
at the time and met at a pub in New York just off Wall Street where they decided
to set up the new company. "We made some decisions that at the time looked
idiotic but in hindsight, turned out well," says Ravishankar. Among them,
the decision to create their own IP, make a shrink-wrapped product and enter the
market right at the top end. "We were all bodies who had been shopped and
we were pretty dissatisfied with the experience. We wanted to do this
differently," says Ravishankar. Amazingly, they did.

S Ramakrishan, CEO, Reveleus

In the long run, i-Flex will have to look at
other verticals. Reveleus is the product that is likely to get them there.
Ramakrishnan passionately believes in safeguarding the individuality of the
product and the unit. "This is," he says, "our vehicle for
branching out." You will hear more from this man.

Joseph
John, head, banking products division

He’s the one who watches the change control
board like a hawk. John joined i-flex in 1988, headed the MicroBanker
development team and later FLEXCUBE. Today, he has an unusual skill in the
Indian market — the ability to create a new product from scratch and
successfully handle the entire gamut of product lifecycle management.Joseph
John, head, banking products division

He’s the one who watches the change control board
like a hawk. John joined i-flex in 1988, headed the MicroBanker development team
and later FLEXCUBE. Today, he has an unusual skill in the Indian market — the
ability to create a new product from scratch and successfully handle the entire
gamut of product lifecycle management.